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Daily Reports @ WJR

WJR July 2009 Reports

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July 31, 2009

The Courtney rally reasserted itself yesterday, although a late-day fade held stock gains to about one percent on the day. The S&P 500 is now up over seven percent for the month of July. That’s the best July in 70 years. The futures are hinting that the good times may still roll this morning. The optimism is based on two bits of expected good news on the docket. If either one disappoints, we may see a bit of a reversal.

At 8:30, we’ll get the Government’s first estimate of the nation’s economic output during the second quarter. The first quarter Gross Domestic Product declined 5½ percent. Consensus is that the second quarter number will decline by only about 1½ percent.

At 9:45 the Chicago PMI is expected to read 43, versus last month’s 39.9. Once again, things not necessarily getting better – but getting worse at a slower pace.

Cost cutting continues to drive good earnings news. Locally, Detroit Edison reported earnings of 51 cents for the quarter versus 17 year a year ago. That, even though revenue fell 25 percent. MetLife, Disney and AutoNation all reported better results than expected on revenue that fell short of estimates.

Asian markets were solidly higher overnight, Europe is pretty much unchanged. At this point, adjusted for fair value, the S&P futures are up more than 3 points, the Dow futures are up 33 and the NASDAQ futures are 4½ points above fair value.

July 30, 2009

The weekly jobless claims report, after being all but ignored for years, is back in the spotlight as traders look for more signs of an improving economy, or at least, a change is the rate of decline. Most however, expect little or no improvement with about 600,000 new claims for unemployment benefits.

More of the same on the earnings front this morning, with most big companies reporting better than expected results. Let’s start with the exceptions – insurance company Travelers fell 3 cents shy of the $1.28 estimate and ExxonMobil reported an 84 cent profit versus the expected $1.02. Eastman Kodak lost about twice as much as expected.

Japanese stocks closed at their highest level in 10 months, Europe is higher and we should start off solidly higher, pending any disaster will the jobs number at 8:30. At this point, adjusted for fair value, the S&P futures are up more than 9 points, the Dow futures are up 67 and the NASDAQ futures are 11 points above fair value.

July 29, 2009

Perhaps a shot across the bow this morning. The Chinese stock market has been on fire this year, but overnight it flamed out a bit. The Shanghai Index closed lower by more than 5 percent, after trading almost 8 percent lower earlier in the session.

Microsoft and Yahoo announced their much-rumored operating partnership about a half hour ago. Microsoft gets a 10 year license for Yahoo’s search technology. Micosoft will provide the Bing search engine and get the scale they want to compete with Google. Yahoo will handle the advertising sales says that that agreement will save the company $200 million in capex. However, Yahoo shares are indicated significantly lower in the pre-market.

Our latest clues regarding the state of the economy come later today in the form of the June Durable Goods report at 8:30, which is expected to be down six tenths of a percent after a 1.8 percent rise in May. Also, the Fed’s latest quarterly Beige Book, which is their survey of regional economic conditions, comes out at 2 o’clock.

Better than expected earnings this morning from Hess, McKesson, Time Warner, FMC Technologies and Moody’s. The big miss of the morning is from Sprint Nextel.European markets are a bit higher right now. Our futures have been on the soft side all morning long. At this point, adjusted for fair value, the S&P futures are lower by about 5 ½ points, the Dow futures are down 38 and the NASDAQ futures are 8 points below fair value.

July 28, 2009

At 10 o’clock this morning the Conference Board will release their reading on July Consumer Confidence. It’s expected to slip a bit from the June number of 49.3. On the one hand, continuing joblessness is weighing on the consumer. However, the recent stock market rally may give the number a bit of a boost.

Earnings news is mainly positive this morning, but is a bit more of a mixed bag than in recent days. Locally, Masco pleasantly surprised with a quarterly operating profit of 10 cents per share. Analysts were expecting a 3 cent loss.

Other pleasant surprises this morning came from Viacom, Amgen and McGraw Hill. On the famous other hand, Office Depot lost almost twice as much as expected and in Japan overnight Canon’s profit was about half of what the market was expecting.

Bank of America will reportedly close about 600 of its branches as people continue the switch to online banking services.

The Nikkei was flat overnight but Europe is slight lower and that will likely be our direction at 9:30. At this point, adjusted for fair value, the S&P futures are lower by about 5½ points, the Dow futures are down 43 and the NASDAQ futures are 4 points below fair value.

July 27, 2009

Fed Chairman Bernanke sat for a long town-hall >

It’s a new week of fresh earnings news, although many of the heavy hitters have already reported. Among those reporting, well over 80% of the S&P 500 have met or beaten estimates. That’s the highest percentage since they started measuring that kind of stuff.

This morning, Corning and Verizon both reported higher earnings than expected and Honeywell met estimates. The disappointment of the morning is insurer Aetna. They cut their full year guidance after reporting a quarterly profit of 68 cents, which was a dime lower than expected.

At 10 o’clock we’ll get the June New Home sales report, which is expected to be a little higher than the April number.

More good news if you’re liable on a LIBOR-indexed loan. The 3 month LIBOR rate has dipped just a shade below one-half of one percent. Remember that it was over 4 percent last fall.

Overseas markets are higher. But at this point, adjusted for fair value, the S&P, Dow and NASDAQ futures are all just about dead even with fair value.

July 24, 2009

With the Dow Jones Industrial Average retaking the 9000 level yesterday and the NASDAQ now up 13 days in a row, we’re starting to see individuals who bailed out of the stock market earlier in the year start to pile back in. Of course, at this point, they’ve missed a 40 percent run-up and may well be leading with their chin as they swing at a stock market that appears, on a technical level, to be pretty overbought. Good luck, market timers.

After a slew of positive earnings news yesterday, we hit a significant bump in the road after the close yesterday. Microsoft reported a profit of 34 cents for the quarter gone by. Analysts expected 36 cents. For the first time EVER, revenue from sale of Windows was lower, and more than a few portfolios are hitting the delete button on Microsoft stock this morning.

Major markets overseas are higher, but we’ll likely start the day slightly to the dark side.

At this point, adjusted for fair value, the S&P 500 futures are up down 2½ points, the Dow futures are down 22, and the NASDAQ futures, on the Microsoft news are now almost 17 points below fair value.

July 23, 2009

In our ongoing quest for true happiness, we are once again reminded this morning that the secret to achieving true happiness lies in sufficiently low expectations.

It would take a good five minutes to list all the big companies that released better-than-expected results this morning. The big story around these parts is Ford Motor. Ford didn’t make money, but they came closer than almost anyone thought. The quarterly operating loss was 21 cents per share versus the expected 48 cent loss. The quarterly cash burn continues to decline – it’s now about a billion per quarter and Ford ended the quarter with 21 billion dollars. Hope is that the cash burn will dissipate and avoid the necessity of another equity offering, which would further dilute the existing shares.

Asian markets were generally higher. Europe is mixed, but we are headed higher again at 9:30. The NASDAQ has now been higher 11 days in a row, its longest winning streak in 13 years.

At this point, adjusted for fair value, the S&P 500 futures are up 4½ points, the Dow futures are up 42, although the NASDAQ futures are just about even with fair value.

July 22, 2009

The corporate earnings parade continues to march right down Main Street and the theme remains the same – better than expected earnings are again front and center.

This morning, Boeing announced $1.41 of operating profit. That’s a 20 cent beat. Meanwhile, U.S. Bancorp beat estimates by 20 percent. Pepsico and Pfizer both reported slightly lower revenue than expected, but both beat profit estimates. Altria reported 50 cents versus 47 and Eli Lilly made $1.12 versus $1.02 ad raised earnings guidance for the year. Last night Apple had a terrific earnings report and this morning Whirpool reported $1.04 per share, which is 2½ times higher than expected.

The disappointment of the morning is Morgan Stanley, losing $1.37 last quarter, which is almost a dollar more than expected.

Mortgage applications rose almost 3 percent last week, in spite of higher fixed rates. About 55% of those applications were to refinance existing loans.

Markets overseas turned mixed overnight and that’s been pressuring our futures all morning and although they had fought back close to fair value, the Morgan Stanley number punched the futures back down during the past fifteen minutes.

At this point, adjusted for fair value, the S&P 500 futures are down 7 points, the Dow futures are down 51, and the NASDAQ futures are about a point and a half below fair value.

July 21, 2009

It’s the same, same old song but for a different reason since the economy’s been gone. Company after company reporting earnings this quarter are reporting higher than expected profit, but now it’s on weaker than expected revenue. It’s not smoke and mirrors – it’s spending cuts. Just check the unemployment rate.

Here’s the list for this morning; DuPont, Merck, United Technologies, Coca-Cola, United Health and Southwest Airlines – all reporting better than expected profits for last quarter on lighter than expected revenue. Blackrock, TD Ameritrade and Lockheed Martin beat estimates on better than expected sales.

The big surprise of the morning is Caterpillar. Cat reported operating profit of 72 cents versus the expected 22 cents. Caterpillar now expects earnings for the year somewhere between $1.15 and $2.25 per share. Yes, that’s a range you can drive a big earth mover through, but even the low end is higher than the previous estimate of $1.01. Caterpillar stock is looking to open almost 10 percent higher this morning.

Hong Kong was flat overnight after a big gain yesterday. Other markets overseas are higher. Our futures have been picking up steam all morning. At this point, adjusted for fair value, the S&P 500 futures are up 4½ points, the Dow futures are up 40, and the NASDAQ futures are about a half-point above fair value.

July 20, 2009

Last week’s stock market rose nicely, but it rose under a dark cloud. That cloud, the pending failure of small-business lender CIT, has reportedly dissipated this morning. CIT has arranged 3 billion of relatively short term financing without the benefit of a government bailout – at least at this point.

Goldman Sachs said this morning that it expects the S&P 500 to rise 13 percent between now and the end of the year. Let’s do the arithmetic on that one – that’s an annual rate of about 28 percent.

This will be a very busy week for earnings reports. While some pundits were predicting horrible 2nd earnings, thus far we’ve seen about 80 percent of those reporting meet or exceed expectations.

Chalk up five more “beats or meets” this morning. Halliburton, M&T Bank and Eaton beat estimates, Hasbro matched expectations (although revenue was a little light) and Johnson Controls reported 25 cents per share, well in excess of the expected 18 cents. Texas Instruments will report later today.

Stocks in Hong Kong rose about 3 percent overnight. Europe is about 1½ percent higher. At this point, adjusted for fair value, the S&P 500 futures are up 5 points, the Dow futures are up 46, and the NASDAQ futures are about 9 points above fair value.

July 17, 2009

Earnings reports from some of the biggest of the big continue to roll, and most are reflecting operating earnings that are better than expected. The nagging problem is that in many cases, the better earnings are the result of cost-cutting rather than revenue growth. Cost cutting in many cases means job cuts and I think we have all had about enough of that.

The best of the bunch of earnings came last night from IBM. Big Blue earned $2.32, beating estimates by 30 cents per share.

Google reported a record profit last night, but only a sales growth rate of 2 percent. That the stock indicated lower this morning.

General Electric, Citigroup and Bank of America all beat estimates, but all missed on revenues. Citigroup stock is indicated a penny or two higher, but GE and Bank of America will likely drop a bit at the open.

The bright spot this morning is Mattel, earnings 6 cents versus a break even estimate.

Markets across the globe rose overnight after our late-day rally yesterday, but we’ll be giving back a chunk of that rally at 9:30. At this point, adjusted for fair value, the S&P 500 futures are down 7 points, the Dow futures are down 34, although the NASDAQ futures are about 2 points below fair value.

July 13, 2009

Earnings reports start flowing in earnest this week. Everyone expects that profit reports for the quarter gone by will pretty much stink. The focus will fall on what, if any guidance companies can give regarding the current quarter and the remainder of the year.

This morning, giant electronics maker Philips reported earnings that dropped 94 percent from a year ago. While that sounds awful, everyone expected them to report a loss, instead of a profit. Philips also said that even if sales don’t pick up a lot, the rest of the year won’t look so bad, because expenses have been bought in line with shrunken demand.

UBS shares are on the rise in Europe on hopes that a settlement with the U.S. Government is in the works. The Swiss Government wants to uphold banking secrecy for those who like to hide nagging details like – oh – the amount of their income. The U.S., of course, is looking to find out which of their citizens are evading taxes by hiding those little details. By some estimates, it’s about 15 billion dollars worth of details. Word to the wise here – fess up on those overseas accounts. The old days are close to being over.

Charles Schwab, CSX and J.B. Hunt reports earnings later on.

Tokyo and Hong Kong were both down about 2½ percent overnight, but most of Europe is slightly higher.

Our futures have dug out of a sizable hole over the past few hours. If the market were to open right now – well, no nobody would notice. Adjusted for fair value, the S&P 500 futures are up a little more than a point, the Dow futures are flat, and the NASDAQ futures are about 1½ points above fair value.

July 10, 2009

Watching stock prices yesterday was kind of like watching a tennis match - without all the grunting. The Down Jones Industrials crossed the break even point 108 times before finishing ever-so slightly higher. Of course today, as they say, is another story.

It’s a new story for General Motors beginning today, as they emerge after just 40 days under Bankruptcy Court supervision. Try doing that, without the Government greasing the skids. In some places, it takes longer than that to get a building permit. In any event, 450 executives and 4,000 other white collar employees will be riding off into the sunset with buyout packages.

Chevron came out with a disappointing report and outlook last night. Yahoo and Dell earning upgrades this morning. IBM was hit was a downgrade.

Progressive and Audiovox report earnings today, but second quarter earnings will not begin to roll in meaningful numbers until next week.

At 10 o’clock the University of Michigan will give us its first estimate of the July Consumer Sentiment Index. It’s expected to drop just a fraction from the June number of 70.8.

Overseas markets are lower, but not by a lot. Our futures are pointing lower, and by more than a little. Adjusted for fair value, the S&P 500 futures are down about 8 points, the Dow futures are down 73, and the NASDAQ futures are about 9 points below fair value.

July 9, 2009

Everyone knows that economic conditions are tough and that corporations have been cutting back on capacity, expenses and people. The question is whether we have yet gotten to a point where the profit and loss statement can show an actual profit.

Alcoa didn’t quite make it back to profitability last quarter, but they came a lot closer than a lot of analysts expected. On an operating basis, Alcoa lost 26 cents per share, which is a lot less than the expected 38 cents. Chevron reports earnings later today. They are expected to have earned $1.22, down from $2.80 a year ago.

The nation’s retailers report June results today. Expect that sales fell, on average, about 4½ percent. So far, Aeropostale and TJX have checked in with better than expected numbers. Weekly jobless claims at 8:30 will be watched as well.

Oil’s up almost a buck, but is still a buck and a half lower than it was 24 hours ago.

A little over an hour ago the Bank of England announced no change in their short term target interest rate of one-half of one percent.

Asian markets were mixed overnight, but Europe is generally higher and we should start the day in the green as well. Adjusted for fair value, the S&P 500 futures are up about 4½ points, the Dow futures are up 32, and the NASDAQ futures are about 5 points above fair value.

July 8, 2009

Ruby Tuesday likes to jump the gun on the official start of earnings season, which they did last night, reporting better than expected results. Alcoa, Pepsi Bottling, WD-40 and Family Dollar report in later on today. Alcoa is expected to report another quarter of losses, which would be the third in a row, this time of about 38 cents per share.

Amgen shares are on the move in the pre-market, higher by more than 10 percent, on word that a Phase 3 trial of Amgen’s bone drug denosumab showed better results that the comparable drug from Novartis.

Freeport-McMoran, Southern Copper and Peabody Energy all received broker upgrades this morning.

Light sweet crude oil is down for the sixth session in a row, down about another 90 cents per barrel at 62 bucks.

In case you’re falling behind on your bills, don’t feel alone. The American Bankers Association reported yesterday that credit delinquencies are now at the highest rate since they started tracking that kind of data in 1974.

Markets overseas are slightly lower this morning, and our futures have been sliding over the past half hour. But if the futures hold where they are now, we’ll get a little (and I mean little) bounce-back at 9:30. At this point, adjusted for fair value, the S&P 500 futures are up a point and a half, the Dow futures are up 12, and the NASDAQ futures are about 3 points above fair value.

July 7, 2009

It’s calm before the earnings storm day. Outside of a report on oil inventories from the Energy Information Agency, there’s nothing of great significance on the docket.

One of the more interesting bits of news is that the Commodity Futures Trading Commission will hold hearings later this month and next on a proposal to limits the amount of speculating that big financial firms can do in the commodities market. You may remember that the price of oil a year or so ago was at $147 per barrel. In less than a year it dropped about 75% before rising back to the $64 level today. That’s not just a change in the supply and demand for gasoline. That’s hot money whipping the market around. The CFTC will consider putting a dollop of “cool whip” on that menu item.

Stock prices did a big U-turn yesterday to finish in the green, and Europe is following that lead. Markets there are higher by a half-percent or so.

Our futures were slightly positive until about 20 minutes ago, when they took a U-turn of their own. At this point, adjusted for fair value, the S&P 500 futures are down 2 points, the Dow futures are down 10, and the NASDAQ futures are about 1½ points below fair value.

July 6, 2009

It should be a relatively low-news day, as we all recover from a long Holiday weekend.

We will get a smattering of earning news throughout the day, but the second quarter earnings season will officially kick off when Alcoa reports on Wednesday.

The ISM Index that measures the health of the service sector of the economy in June is expected to rise a couple of points from May’s reading of 44. Yes, that would be an improvement, but a reading below 50 indicates contraction of business activity.

Broker upgrades are out this morning for Seagate, Western Digital, Goldman Sachs, Nordstrom and T. Rowe Price.

Light sweet crude oil is slip sliding away again this morning, off 3 bucks or so to right around $63.70 per barrel.

Major overseas stock markets are lower, generally about one to one and a half percent. Our futures are off their lows, but are still not a pretty sight.

At this point, adjusted for fair value, the S&P 500 futures are down 8 points, the Dow futures are down 64, and the NASDAQ futures are almost 10 points below fair value.

July 2, 2009

It’s all about the jobs as we wrap up the trading week a day early. The monthly Unemployment Report from the Department of Labor is being pushed ahead be a day from its usual Friday presentation. At 8:30, expect to hear about a 9.6 percent unemployment rate and the loss of another 370,000 non-farm jobs. There are whisper numbers floating around that are worse than those levels, and those rumors have the futures in a hole this morning. The average hourly wage is expected to have risen one-tenth of one percent.

Here’s a nice juxtaposition of how different companies approach the recession, or depression, or repression, or whatever you’d like to call it.

According to the Financial Times, Kmart is launching a new card for unemployed workers that will entitle them to 20% off on Kmart-branded goods. On the other hand, Citigroup is raising interest rates on credit cards of their borrowers who appear to be in the most trouble. Remember, if you would, that the federal government owns about a third of Citigroup.

Most major markets overseas are a bit lower. Our futures ticked a bit lower about 5 minutes ago, now just about 12 minutes in front of the Jobs Report.

At this point, adjusted for fair value, the S&P 500 futures are down 6½ points, the Dow futures are down 54, and the NASDAQ futures are about 8 points below fair value.

July 1, 2009

Does it feel like a Thursday? Yesterday sure felt like a Wednesday to me. That’s probably why I told you that the Construction Spending and ISM reports were due. They actually roll out a 10 o’clock THIS morning. No wonder the stock market fell yesterday – everyone was confused. I’ll take the blame.

Anyway, this morning it’s a couple of employment related reports that are attracting interest. The Challenger Layoff Report for June reported the domestic corporations cut 74,000 jobs in June. That’s a big improvement from anything we’ve seen since the Lehman Brothers collapse last September and puts layoffs at a 15 month low. ADP just announced a job loss of 437,000, or 473,000 – there’s some confusion with the report. In any event, it’s worse than the expected 380,000. (UPDATE - The correct number is 473,000)

General Mills reported earnings of 86 cent for the quarter gone by. That is 6 cents higher than expected. General Mills also raised guidance for the current quarter.

Asian markets were lower overnight, but Europe is higher on the order of one percent or so. We should start higher as well, although the futures took a hit on the ADP report. At this point, adjusted for fair value, the S&P 500 futures are up more than 3 points, the Dow futures are up 19, and the NASDAQ futures are almost 8 points above fair value.

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